Am I missing anything obvious?

[destriero]

Just saw these last posts, thanks.
I didn't consider NFP. I was just looking at the structure itself, I didn't take the trade.

Still interesting, I often look at short dated prices on a diagonal level. I like the long tail idea these days.

Yeah, it only looked good bc of the vol-switch (D1 vols over D2) due to NFP. Yeah, I am always long tails.

 

[TheDawn]

Yes thanks, I meant vol crush.
Didn't take the position, just trying to understand.
Although I have traded similar structures in the past.

I would love for SPX to fly away with a structure like this, because of the ratio, long tail.

I am not trying to predict the vol crush, just modeling to see the risks if that happens, and I think that is what destriero advice is about, if I understood at a glance. What to look for when modeling the structure.

Oh ok since you asked in your post "Should I maybe worry about volatility contraction for the long legs?" so I thought you have actually taken a trade and are concerned about the phenomenon of the "volatility crush" affecting your profitability and I thought I answer your questions. On the payoff diagram which is what you pulled off from TDA, you need to look at the profit/loss that you would get shown on the vertical axis on the left corresponding at different levels of the underlying in this case the SPX. That's what I was trying to show you.

 

[destriero]

Oh ok since you asked in your post "Should I maybe worry about volatility contraction for the long legs?" so I thought you have actually taken a trade and are concerned about the phenomenon of the "volatility crush" affecting your profitability and I thought I answer your questions. On the payoff diagram which is what you pulled off from TDA, you need to look at the profit/loss that you would get shown on the vertical axis on the left corresponding at different levels of the underlying in this case the SPX. That's what I was trying to show you.

lol

 

[murray t turtle]

I understand that payoff charts are relative with calendars and diagonals.

Is there anything wrong with a structure like this?


Should I maybe worry about volatility contraction for the long legs?

even if the intention would be to be flat by short expiry?


View attachment 298777

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You mean besides the dividends\
+bid ask\ spread??
I hope it pays off for you; i use line charts if candle charts are not available or appropriate

 

[cesfx]

%%
You mean besides the dividends\
+bid ask\ spread??
I hope it pays off for you; i use line charts if candle charts are not available or appropriate

I use candles too, vertically. Horizontally lines work well

The concern was on volatility crush risk, as that payoff looked too good.

I monitored it and it did lose value after the open and post NFP on volatility drop (long legs). The combo went from approx 60$ premium to 50$ mid.
Then recovered for a few dollar profit when Spx gave back today's gain.

 

[TheDawn]

I use candles too, vertically. Horizontally lines work well

The concern was on volatility crush risk, as that payoff looked too good.

I monitored it and it did lose value after the open and post NFP on volatility drop (long legs). The combo went from approx 60$ premium to 50$ mid.
Then recovered for a few dollar profit when Spx gave back today's gain.

Well you would've made some money on the short straddle. I believe the premium for the combo might have been around 56 at EOD yesterday, so for 1 contract, the premiums would've been $5,600, assuming you held it to the end and not closing the position early, from assignment in the form of cash settlement, you would've made $(56 -20 ) = $3600 for 1 contract. Not bad for a NFP day. Totally forgot it's NFP today.

 

[cesfx]

Well you would've made some money on the short straddle. I believe the premium for the combo might have been around 56 at EOD yesterday, so for 1 contract, the premiums would've been $5,600, assuming you held it to the end and not closing the position early, from assignment in the form of cash settlement, you would've made $(56 -20 ) = $3600 for 1 contract. Not bad for a NFP day. Totally forgot it's NFP today.

From the short legs yes, but I think the long legs would be at a loss of around 50$, so the total for the combo would be negative for about 14$, approx market close estimation: (59.40 open - 34.40 close) X2 - 36 (stradlle)

 

[newwurldmn]

From the short legs yes, but I think the long legs would be at a loss of around 50$, so the total for the combo would be negative for about 14$, approx market close estimation: (59.40 open - 34.40 close) X2 - 36 (stradlle)

thedawn doesn’t know what he’s talking about.

 

[cesfx]

thedawn doesn’t know what he’s talking about.

 

[destriero]

Well you would've made some money on the short straddle. I believe the premium for the combo might have been around 56 at EOD yesterday, so for 1 contract, the premiums would've been $5,600, assuming you held it to the end and not closing the position early, from assignment in the form of cash settlement, you would've made $(56 -20 ) = $3600 for 1 contract. Not bad for a NFP day. Totally forgot it's NFP today.

WTF is wrong with you?